Intergenerational solidarity: an apparent imbalance?

Intergenerational solidarity, at the heart ofsocial protection in France, is evolving to meet the challenges of an ageing population. Indeed, it is a gigantic machine for collecting and redistributing the wealth produced. In 2019, over 700 billion euros – or 31.3% of GDP – passed through the nation’s social accounts to finance pensions, healthcare, the fight against poverty, housing and family benefits. This sum contributes massively to reducing income inequalities, with a transfer taking place between well-off and modest households.

But at the heart of French social protection lies another principle. It’s the active who pay for the inactive, the youngest and the oldest. How has this intergenerational solidarity evolved? This is the question addressed by the COR (Conseil d’orientation des retraites), which has compiled the work of researchers and socio-economic studies. A question we’d like to formulate differently: is the weight of the social protection system bearable for young working people?

Social protection to the test of ageing

In 1979, social protection expenditure represented 25% of GDP. Today, they represent 31.3% of national wealth. The increase is mainly attributable to sickness and old age. Unsurprisingly, it is the over-60s who have contributed most to this increase. In 1979, their social protection spending accounted for just over 10% of GDP; by 2019, it had climbed to over 18%, almost a fifth of wealth produced. That year, 450 billion euros in social benefits were distributed.

This trend is due solely to the aging of the population and the increase in the number of beneficiaries over 60. In fact, over the same period, per capita benefits as a percentage of GDP have tended to stagnate, and even declined over the last 10 years. At the age of 70, a person receives around 29,000 euros in social spending. Most of this is spent on retirement pensions, and around 5,000 euros on healthcare. At the age of 25, the amount received for national solidarity – including unemployment, integration, maternity, health, etc. – does not exceed 5,000 euros.

Adjustments to the financing of social protection

In principle, the social protection system is financed by working people. Demographic trends over the past 4 decades have been unfavorable: more beneficiaries, fewer contributors. However, a series of reforms has led to a diversification of resources and a broadening of the tax base. First, the CSG, then the authorities allocated various taxes to its financing. These levies have helped to spread the burden a little more evenly, and to involve the older population as well. Secondly, the plan to reform in France in 2020 has curbed the increase in spending. In particular, by delaying the retirement age and reducing pensions, it will save an estimated 50 billion euros by 2019.

Despite this, the burden of financing weighs heavily on the shoulders of working people. The 40-59 age group is hardest hit. In 2019, a person in this age bracket contributed 19,400 euros a year, compared with less than 8,000 euros for 60-79 year-olds, whose participation has nevertheless risen sharply over the 2000s.

Young workers: victims of intergenerational solidarity?

Are young people aged between 20 and 39 better off in the end? Not really. First of all, everyone in this age bracket contributes an average of 14,500 euros a year to the financing of social protection, and thus to intergenerational solidarity, two-thirds of which comes from contributions. Admittedly, this is less than the 40-59 age group… but for a good reason: their incomes are proportionally lower. This was not the case in the late 1970s. Better educated than their elders, entering the workforce earlier than today, benefiting from dynamic careers and rapid salary increases, young working people reached their “contribution peak” at age 30 in 1979.

Today, despite a relative drop in their contribution to social protection, the effort rate* of 20-39 year-olds stands at 39%, an all-time high and higher than that of any other age group. Young people are therefore making unprecedented “efforts”, given their means, to keep the system going. At the same time, they have to wait until they are 40 to reach the same standard of living as retirees. Their savings rate does not exceed 9%, whereas it is 25% for people over 70. Buying their own home is a distant dream.

To conclude

In short, young working people work and contribute patiently while their elders save (see our article on the employee savings scheme). Is the system, based on intergenerational solidarity, still adapted to the current situation? The question deserves to be asked. It could just as easily be put into perspective with phenomena that are strongly affecting younger generations:absenteeism in the workplace, disengagement and a loss of meaning at work. What if these manifestations of discouragement were ultimately the result of a rational calculation? Working to finance this protection is undoubtedly satisfying. But after that, you need to be able to keep enough to finance your own life projects.

*The social protection effort rate is the ratio between what individuals pay to finance social protection and their “super gross” income, i.e. wages + contributions + public cash transfers.